Suppose that the firm with the costs and revenues shown in the figure to the right is contemplating whether or not to produce 12 units of output. If it were to produce this many units, what (if anything) would happen to the market price? What would be the firm's marginal revenue for the 12th unit produced? What would be the firm's total revenues per hour?

Question

Suppose that the firm with the costs and revenues shown in the figure to the right is contemplating whether or not to produce 12 units of output. If it were to produce this many units, what (if anything) would happen to the market price? What would be the firm's marginal revenue for the 12th unit produced? What would be the firm's total revenues per hour?

This firm is --a. oligopolistic, b. monopolistically competitive, c. perfectly competitive, d.
, monopolistic---so its output rate is---a. so large, b.so small---in relation to the industry as a whole that its production---a. could not, b.could---influence the market price, which would---a. remain at, b. fall below, c. rise above---$7 per unit. The market price---a. exceeds, b.is less than, c.equals---the firm's marginal revenue, which therefore would be MR---a. =, b.<, c.>---$7---per unit. The firm's hourly total revenues if it were to produce 12 units would be TR---a. =, b.<, c.>--- $84.
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Answer 1

This firm is perfectly competitive, so its output rate is so small in relation to the industry as a whole that its production could not influence the market price, which would remain at $7 per unit. The market price is greater than the firm's marginal revenue, which therefore would be MR < $7 per unit. The firm's hourly total revenues, if it were to produce 12 units, would be TR = $84.